If you find yourself
with a little financial cushion -- your debt is under control, your emergency
savings fund is in good shape and you have a monthly budget plan in place --
you might want to look into investing and growing your money. People tend to use investments for long-term financial
goals such as planning for retirement or paying for a child's college education.
You do not have to bring in a certain income or have a set amount in savings
before you can make investments. In fact, the earlier you start investing
(regardless of how small the amount), the more time there is for the money to
grow.

While
the information here is not intended to serve as financial advice, it can help
in understanding some of the basics about investing.

Stocks

When
you buy stocks, you are buying ownership in a company. While you do not participate
in the day-to-day operations of the company, you can vote and express opinions
on shareholder issues. You can profit when a company does well because your
stock value will rise. (Of course, the opposite is true: When a company or the
stock market does poorly, your stock can take a hit.) To buy stocks, you can
synch your bank account with an online brokerage firm such as E-Trade or Ameritrade to purchase and sell stocks online. Alternatively, you can
go through a broker and pay a commission fee. Or you can buy directly from a
company. DRIPInvestor.com lists companies that allow direct
stock purchases.

Pros:

Over
the long term, stocks tend to yield higher returns than other types of
investments.

Some
stocks pay dividends, which can be used as additional income or to buy more
shares.

Cons:

Because
the stock market is unpredictable, stocks should be considered a long-term
investment.

There
is no guaranteed return on your investment. Stocks can fall dramatically during
a bear market and wipe out your portfolio, or they can rise greatly during a
bull market.

Mutual Funds

Many
investors – novice and experienced alike – invest in mutual funds. With a
mutual fund, your money is pooled with money from other investors, giving you a
stake in a variety of stocks and bonds. A fund manager reviews the portfolio on
an ongoing basis.

Pros:

This
collection of stocks and bonds can be a good way to learn about the stock
market, generally carrying less monetary risk than a single stock.

An investment of $2,000 or less can get you a diversified
portfolio for much less than buying individual stocks and bonds.

Cons:

Because
mutual funds are diversified, monetary growth can be slower and steadier than
stocks.

In
addition to management fees, you may pay fees at the initial purchase and then
at the sale. This decreases the return on your investment.

Bonds

When
you buy bonds, you are basically acting as a bank and loaning money to a
company or government entity. In return, the organization promises to pay you
back the full amount with interest. The longer you loan money to a bond issuer,
the more money you can make. Overall, bonds tend to have lower long-term
returns than stocks or mutual funds. You can buy U.S. Treasury bonds directly from the federal government.

Pros:

Bond
prices fluctuate less, and are more stable than stocks or mutual funds.Certain
bonds, such as U.S. Treasury bonds, can be quickly bought and sold without
substantially affecting the bond's overall price.

Cons:

Issuers
sometimes default on bonds. They may fail to make timely payments on a bond's
interest or principal.

Bond prices fluctuate as interest rates rise and
fall. This means you could get less than your original investment back if you
need to sell a bond before it reaches maturity and interest rates have dropped.

Many
people may find it helpful to talk to a professional when entering the world of
investing. A financial advisor can help determine the best path to help you
reach your short-term and long-term financial goals. If you do not have a
financial advisor, your bank can be a good starting point.

Of
course, the very best investment is to pay off debt – especially credit card
debt. Once you are debt-free, investing is a good way to save for your future. To
learn more about investing, visit the U.S. Securities and Exchange Commission's
site, Investor.gov.

Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.

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